Question

Consider the following data:

Monthly Profit of a Gym

Month	Jan-12	Feb-12	Mar-12	Apr-12	May-12	Jun-12	Jul-12	Aug-12	Sep-12
Profit ($)	6,150	5,903	5,304	5,077	5,320	5,998	7,419	6,299	6,012

Step 1 of 5:

Determine the three-period moving average for the next time period. If necessary, round your answer to one decimal place.\

Step 2 of 5:

What are the MAD, MSE and MAPE scores for the three-period moving average? Round any intermediate calculations, if necessary, to no less than six decimal places, and round your final answer to one decimal place.

Step 3 of 5:

Determine the exponentially smoothed forecast for the next time period using a smoothing constant, α, of 0.35. If necessary, round your answer to one decimal place.

Step 4 of 5:

What are the MAD, MSE and MAPE scores for the exponentially smoothed forecast? Round any intermediate calculations, if necessary, to no less than six decimal places, and round your final answer to one decimal place.

Step 5 of 5:

Based on the MAPE scores, which forecast is best?

Exponential smoothing, because the MAPE score is lowest.

Three-period moving average, because the MAPE score is lowest.

Three-period moving average, because the MAPE score is highest.

Exponential smoothing, because the MAPE score is highest.

Answer 1

Step 1 of 5:

Step 2 of 5:

MAD = Mean of Absolute Error = (708.6667+108+764.3333+1954+53.3333+560)/6 = 691.388883

MAD = 691.4

MSE = Mean of Error² = (502208.4444+11664+584205.4444+3818116+2844.4444+313600)/6 = 872106.389

MSE = 872106.4

MAPE = Mean of Absolute Error% = (13.96%+2.03%+12.74%+26.34%+0.85%+9.31%)/6 = 10.87%

MAPE = 10.9%

Step 3 of 5:

Step 4 of 5:

MAD = Mean of Abs. Error = (0+ 247+759.55+720.7075+225.4599+531.4511+1766.4432+28.1881+268.6777)/9 = 505.275278

MAD = 505.3

MSE = Mean of Err.²

= (0+ 61009+576916.2025+519419.3006+50832.1552+282440.2518+3120321.5888+794.568+72187.7316)/9

= 520435.644

MSE = 520435.6

MAPE = Mean of Abs. Error% = (0%+4.18%+14.32%+14.2%+4.24%+8.86%+23.81%+0.45%+4.47%)/9

= 8.3%

MAPE = 8.3%

Step 5 of 5:

MAPE score is less for Exponential smoothing, so forecast using Exponential smoothing is best.

Correct Answer: Exponential smoothing, because the MAPE score is lowest.